Filing Taxes Separately Won't Help Under Tax Bill, Couples May As Well File Jointly

September 3, 1986|By United Press International

WASHINGTON — Two-earner couples wondering if they could avoid a ''marriage penalty'' under the new tax reform bill by filing separate returns are out of luck, according to new details of the plan released Tuesday.

An 80-page summary of the bill prepared by the Joint Committee on Taxation outlined several details in the legislation for the first time, including its tax treatment of married couples filing separate returns.

The summary, prepared in the last few weeks by congressional aides, filled in some of the blanks left because of the haste with which House and Senate negotiators approved the plan on Aug. 16.

Since then, Congress has been in recess and staff members have been writing many of the details of the bill.

The task of drafting the massive legislation is expected to take a few more weeks. The bill then must be approved by the full House and Senate before going to President Reagan.

Overall, it appeared the 80-page summary of the bill contained few surprises and mostly colored in the background of what already was known.

It showed that under the bill, as in current law, working husbands and wives who file separate tax returns would not receive as great a tax break as single people.

Because the plan approved in August did not address the matter, some working couples had questioned whether they could avoid some of the ''marriage penalty'' included in the bill by filing separately. The summary showed they could not.

Once the bill is in place, a single person would pay 15 percent tax on the first $17,850 of taxable income, 28 percent from that point to $43,150 and a 33 percent rate from that point to $100,480. Income above that point would be taxed at 28 percent.

However, as in current law, husbands and wives who both work generally would be hit with a ''marriage penalty'' -- paying more tax than if they were single. The bill also drops the special two-earner deduction that working couples can take now.

Married couples would pay 15 percent tax on the first $29,750 of taxable income and 28 percent tax on income up to $71,900 under the new bill. The top rate then would go to 33 percent and last until at least $171,090. It would last longer if the couple had children.

For example, two people who each have a taxable income of $30,000 would pay a total of $12,159 in tax if they were single but at least $12,932.50 if they were married -- a ''marriage penalty'' of $773.50. The difference would be much greater if the husband and wife had individual retirement accounts.

The summary showed married couples filing separately would be treated the same, or worse, than if they filed a joint return.